Microsoft employees in 1978 at company headquarters in Albuquerque, New Mexico.

• Microsoft, where a long-time, hard-charging number two has taken the reins from the man who founded the firm in 1975 and led it from a small handful of people to one of the world’s largest and most important companies.

• Nokia, a firm whose ascendancy to a dominant position globally was relatively recent.  In the last three years they have been eclipsed in industry leadership and market capitalization, and in the consumer imagination, by two firms who entered the industry within the last couple of years, Apple (June 2007) and Google (September 2008)—and one of them doesn’t even make phones.

The company is now led by a long-serving senior executive who, while he preaches change, says following a brutal analyst meeting, We are not getting the benefit of the doubt.  Adding, We need to change that.

To this, a long-time friend and Nokia alum who worked closely with many of the company’s senior executives,  commented,

That would be your challenge!  No one owes Nokia “benefit of the doubt” – you earn your way with cool, with “it” products at the right price, and that alone sustains a company.  No amount of marketing or PR will save a substandard product.

• General Motors, a firm that once personified American industry, as shown in this ad in happier days . . .

  
  
  

  . . . 12 months ago underwent one of the largest Federal intrusions ever in private industry and is now led by Ed Whitacre, an industry outsider who famously proclaimed, “I don’t know anything about cars” the day after he was appointed.  (Lesson 1: Lower expectations.)  Whitacre, a former telecom exec, has words appropriate for a firm of any size,

I want to make sure people understand that the responsibility for this company to be successful is not just with the C.E.O.  It’s them.

My style is really just to say, “Let’s get going, let’s do something, let’s move, and let’s not be constrained by something that has happened in the past.  Nobody is going to be fired for trying something new around here.

Some of the world’s most storied companies have faced major challenges that knocked them from their perch atop their industry.  Some turned themselves around after many counted them out, only to return as an industry leader.  Disney and IBM come to mind.  Others are works in progress, including Sony, Kodak, Ford, and Boeing.  And there are recent stars that are struggling, some with new leadership, such as Yahoo!, and others with largely the same management team, such as eBay.

Whether one leads a large company or a small one, it’s fascinating and instructive to watch all these companies.  The trick, of course, is knowing whether one is observing success or failure in the making.

…

Note: I’ve set set aside firms in the financial and health care industries, the shape and future of which will be greatly affected by Federal legislative and regulatory changes, and firms in any industry that can be easily digitized (e.g., newspapers, magazines, recorded music), which are all being radically transformed by the web.

Regarding the latter, this quote, attributed to Warren Buffet, comes to mind: When a management with a reputation for brilliance tackles a business with a reputation for bad economics, it is usually the reputation of the business that remains intact.

(Note: The private sector is replete with examples of large, successful, entrenched organizations that thought themselves immune.  Nortel, Polaroid, DEC, and Data General (below), are a few of many.)

Nonetheless, there are several initiatives underway, some of which have the potential to make an important difference.  One of them concerns public access to Federally-funded research and began earlier this week with the Federal Office of Science and Technology Policy’s announcement of an online forum on this issue.  The fact that the question is being asked at all, and that the discussion is public and online, is in and of itself progress.

However, the topics to be discussed—implementation (12/10 – 20), features and technology (12/21 – 31), and management (1/1 – 7)—suggest that the operating assumption may be that any new effort will require rules, infrastructure, and headcount.

My comment, as a resource-constrained entrepreneur (and taxed taxpayer), advocates a different approach:

While raising this issue is progress, it will only matter if and when something is implemented.  Rather than cautious small measures made after lengthy deliberation and implemented over a period of years, why not take a revolutionary, innovative approach and do something simply, cheaply now.

Starting January 1:

- Grant applications are made public upon submission.
- Progress and results reports are made public upon submission.
- All research that includes Federal funding of any sort must disclose the amount of the funding and the agency giving the grant when the research is published or presented in any medium.

This requires no cost and only a few minutes of time. Use existing documents, which means the cost of creation is zero, and existing publishing infrastructure, such as scribd.com, which is free to all and already used widely by the SEC and other Federal organizations.  (My document stream on scribd, most of which concerns historic preservation.)

The excellent search (full-text, author, keywords, tags) will take care of discovery.  Free tools enable embedding documents in web pages and blog posts.

Implementation is as simple as requiring all grant requests going forward to include a standard compliance line that places the burden on those submitting grant requests.  And for those individuals, their only cost would be uploading already-created documents, which takes less than 5 min./document.

Finally, if instituting this in a few days seems unfathomable, make it January 1, 2011.  Either way, let’s make it incredibly simple and straightforward to understand, very cheap/free to implement, and comprehensive in scope.

It will be interesting to see if and when progress is made.  Meaningful change is very hard in any  bureaucracy.

There is one area in which states do face a direct and compelling challenge that often motivates them to adopt new technology: Warfare.

The management team at Data General, a company founded in 1968 by former DEC execs, would have been advised to pay closer attention to the message in their own commercial.  The company, which rode the minicomputer boom up and down as technology and competition evolved, was acquired by EMC (founded in 1979).  EMC promptly closed down or sold off everything except Data General’s storage business.

Innolux was founded six years ago by Terry Gou, who also founded and is chairman of Hon Hai Precision Industry, the world’s largest ( by revenue) contract manufacturing firm.   Among their customers are Sony, Apple, Motorola, and Nokia.   (This excellent August 2007 Wall Street Journal article profiles Gou and his company.)

How did Hon Hai get it’s start?  By “making knobs for black-and-white TV sets.”

One model of Nokian boots offered today.

One of those customers, Nokia, got it’s start in wood pulp in 1865, and later made a name for itself in rubber boots and tires.  It wasn’t until the 1990s that Nokia began to focus on telecom.  In 1990  the rubber boots business was spun out as Nokian.  Two years later Nokia released their first GSM phone.

One of the biggest challenges facing any leader is determining the company’s direction and allocating the resources across many different opportunities.

In the case of these two companies, both multi-billion dollar global firms, the earlier decisions—to give up tires and knobs and focus on telecom and electronics—seem obvious.  That’s seldom the case when you’re in the midst of making those decisions.

Today, faced with a rapidly-changing landscape, the management team at Nokia has reorganized (more than once), acquired several companies, and launched new services in an effort to better compete in this new world.  Whether Nokia can remake itself this time, as they’ve done many times over their long history, is far from clear.

The surprising finding, as shown in the first chart below: Not the importance of reviews or the popularity of social media–Facebook, Twitter, and the like–but the very low use of the old fashioned suggestion box.  Of those companies surveyed, only 1 in 5 has a way for people to directly make suggestions and fully 1 in 3 have no plans to add this capability in the future.  By contrast, more than 8 out of 10 have a Facebook fan page.

Now compare the expected or perceived impact on sales of social media tools with the impact of a suggestion box.  As the second chart shows, after product reviews (ranked first by 78% of respondents), the ability to supply product suggestions is thought to make a much larger contribution to sales than any of the social media tools: 41% versus 26% for Facebook Connect, 13% for a Facebook fan page, and 7% for Twitter.

Chart: Current and planned use of social media and other tools.

Chart: Social media's expected impact on sales.

What’s going on here?

Three things:

1. Keeping up: Social media is all the rage and has made the leap from tech-centric early adopters to broad adoption in society. And if the marketing folks haven’t already set something up, they’re prodded by executives who ask, “Do we have a Facebook for our company?”  (Yes, that’s the way they talk.)  Setting something up on Facebook is simple and fast, so in no time their company is using social media.  Voila!  Transformation!
2. Linking tactics to sales: In most organizations, there is no comprehensive way to link sales to marketing tactics.  (Web-based businesses have a much easier time of this than those companies sell through multiple channels.)
3. Really listening: Customers want to connect directly in meaningful ways with a company in order to get products and services that better meet their needs.

It’s this last driver that ties all of this together.

• Customer reviews: “Here’s what I think of the product/service I just bought from your company.”  And often, “I wish it . . . “
• Suggestion box: “Please make or change or do this . . .”

Facebook, Twitter, viral videos, forums, and blogs are vehicles for expressing those views.

Implications

Marketing is too often the implementation of tactics.  These survey results are a reminder that it’s the content of the communications and the intent of the parties involved that really matters.

Even marketers, in their heart of hearts, understand that customers want companies to listen to their concerns.

The never-ending challenge for marketers is getting their company to listen, and for senior executives, getting their company to respond.

…

Survey details: The e-tailing group/PowerReviews 1st Annual Community and Social Media Survey, September 2009.  (The slides are here, and oddly not on Slideshare, the social media site that has great tools for displaying, discussing, and embedding notable presentations.)

The home page of Organize.com, with selected types of navigation highlighted

Much has been written about designing website navigation, but Organize.com does an especially good job of showing the kind of helpful navigation that results when you think like your customers.

By understanding that there are different types of customers that will be looking for things in different ways, the designers have created navigation that gives buyers many ways to find what they’re looking for—in spite of the fact that the navigation groupings fly in the face of the some of the traditional ways that people have thought about navigation.

Three very different approaches (also highlighted in yellow in the screenshot):

• As seen in . . . — Navigation by magazine cover (with date).  The screenshot shows the expanded view that appears when you click on the link in the main nav.
• Organized by color
• Shop by brand

In addition, the designers have included a variety of other content categories, including . . .

• What’s New—By date, making it easy for frequent shoppers to zero in on the items recently added to the site.
• Video Library—By content format; a different way to engage buyers and stimulate interest in featured products.
• Eco-Friendly—By item material and construction, though more likely this works as a psychographic profile of a buyer segment.
• Clearance—By price (i.e., lowered); attracting the segment of shoppers interested in “a deal.”
• Mrs. Organized—By application, with a blog written by in-house and guest experts.

Along with As seen in . . . , these are all in the same navigation area, the brown tabs shown in the screenshot.  What’s the common element that would cause one to group these together?  None whatsoever, other than that these work in helping the many different types of buyers.

Other main navigation items include . . .

• Gifts and Occasions
• She—A category that includes The Career Girl, The Hostess, The Mommy, and others
• College
• Kitchen, Closet, Bath, Storage, Shelving, and other locations and applications

As above, there is no logical reason that these would be grouped together.

In other words, if a person were to go through the exercise of thinking, “What goes together?” you would never end up with these navigation groupings.  On the other hand, if you were to think, “Why might someone be coming to the site?” and “What are they trying to accomplish?” and “What factors are most important to them?” one might easily end up with top level navigation that includes As seen in . . . , Kitchen, and Eco-Friendly and Shop by Color.

It all comes down to thinking like a customer rather than as an information architect, or at least the way many information architects have approached this problem.

And what brought me to Organize.com?  Trying to match a tall white plastic bin purchased several years ago at The Container Store, earlier today I stopped into one of their stores and walked down every aisle looking for the item.  I didn’t see it, and asked a clerk.  She summoned other clerks, I described to them the size, shape, style, material, and color of the item—I hadn’t brought it with me—and they said that they didn’t think they carried it anymore.

At home, I looked at the bottom of the bin and saw the name of the manufacturer molded into the bottom.  A quick Google search brought me to Organize.com, where I clicked on Shop by Brand.  I selected the manufacturer and clicked on “View all” when I got to the manufacturer’s page, and then quickly scrolled through what would have otherwise been 46 pages of items and found that they do make the same bin, though in a slightly different shade of white.  Total elapsed time from the Google search?  About three minutes, thanks to the site’s helpful navigation.

(The Container Store’s site doesn’t include the shopping brand as a navigation choice; entering the name of the manufacturer in the search box on the site returns no results.)

A note about the IDEA Process

In work for Nokia, GameStop, and other clients we developed the IDEA process: Iterative Development, Evaluation, and Analysis, which is a process for creating site blueprints (including navigation and information architecture) based on in-depth sessions with users interacting with current and development sites to complete tasks.

In every downturn there are a few, however, with smart, committed teams that have found a niche and have an up-close, living, breathing understanding of the critical needs of their target customers. They’re working night and day to address those needs, and are ruthless in sizing up how they’re doing and adjusting their plans.

The recession may also help wash out some of the soft thinking in marketing, though here I’m less optimistic. For all of the analytics that the web provides, we still see the mad rush from popular tactic to popular tactic, with sometimes the most tenuous connection with the underlying business. It’s marketing plan by marketing tactic, following the dictates of Sales, or the overbearing direction of a founder CEO, or the crowd, doing what everyone else seems to be doing. (“We need a Facebook page!” Really? “Follow us on Twitter!” Why? . . .) In the echo chamber that is the web, a reassuring voice is never far away.

What’s missing? A strategy that links these tactics to a business objective. Without one, these activities merely drain resources–budgets, staff time, management attention–from what may be far more critical efforts.

One of the defining characteristics of those start-ups that will succeed is that everyone is pulling in the same direction, with the same vision and commitment. It comes in part by staying focused on the long-term while at the same time getting the execs and key members of their groups out into the field meeting with customers and potential customers, hearing from them directly and taking the responsibility to make sure that the company responds.

It’s both challenging and rewarding, and it’s the best way to make it through the downturn and come out stronger on the other side.

It wasn’t always this way, and it’s instructive to consider the underlying forces that drove this and the role of some of the Web’s largest companies in this evolution.

Buyer behavior today

Here’s the way in which I buy most things, which I imagine is similar to the approach of many others who buy a lot of different things online:

Determine the specific product I want—Read various review sites and read newsgroup posts, both through Google (google.com and groups.google.com).  To narrow this down, check Amazon and read the reviews there.  One of the things that Amazon has added that has been especially helpful is the information that notes, “People who shopped for this item also bought/viewed . . .”  This may add a product or two to my list to check out.

Ideally, find a unique product name or model number.

Find the low-price sellers—Enter this in to Froogle.  If I’ve already got a model number, such as for the Lutron dimming switches I recently purchased from “Beverly Hills Electronic,” this is where I start; no product shopping required.  (I use the Firefox browser with Google search built into the toolbar, which includes buttons for site search, search within discussion groups, and a Froogle search, which means that product search is available from every page.)

Rank the results from low to high, which is done with one click, and focus on those at the top of the list (i.e., those that are the cheapest).  Depending on the item, check eBay.

Assess the trade-offs for low-price seller—Look through the first few low price results for a retailer one recognizes. Check the “About us” and other information at the site to assess the degree of confidence in the merchant.  This includes their stated return policy and information from independent store rating services (if available).  Weigh whether the price difference between the cheapest and the next cheapest and is worth the difference in perceived risk? For example, is it worth saving $17 on a $300 item if that means I’d be buying it from a company that I’ve never heard of and who claims they have it in stock, versus from Outpost (a division of Fry’s) or buy.com or Amazon?

Because the Web enables anyone to put up a store front, the price competition is brutal, and since with many products the only thing you care about is price—you’ve already figured out what you want and there isn’t any after-sale service to consider—using a convenient shopping search engine such as Froogle increases the likelihood that you’re getting the best price possible.

It’s exactly this behavior that caused Yahoo to launch Yahoo stores and later drove Amazon to create their zShop program and their “sell yours” programs, and still later to purchase a small search technology company and invest in the additional development necessary to launch A9.

The new battleground

The battle now shifts to getting people to use “your” search engine.  Here are four ways in which this battle is being waged:

• Convenience: Building search into the toolbar.
• Ubiquity: Building it into the browser (MS).
• Pervasiveness: One form of this, though not specifically search, is Google’s gmail, which incorporates their Adwords ads, which are triggered by the context of the e-mail messages.  And we’ve all read about the work being done on hard drive search.  We’ll see something from Google soon that provides hard drive search and includes Adwords Ads in the results.
• Money: Amazon has created their “splitting the pi” financial inducement, which I think creates a perverse incentive for Amazon buyers to search for products outside of Amazon.

Special cases

• Travel—The travel aggregator sites have done an excellent job of making it much easier to find good prices on all aspects of travel.  On top of these have come new companies whose products search not only those sites but also the sites of some of the hoteliers that advertise that they have the guaranteed lowest rates and the specialty travel sites that offer last minute fairs, for example.  (Some of the aggregators have purchased or have deals with some of these, of course.)

• Repeated buying in one product category—In the case of someone who is buying the same type of thing over and over again, such as books, a specialty book store site or a few might be the only place one goes.

• eBay

Increasing returns to scale—One of the cornerstones of eBay’s success is the fact that they benefit from increasing returns to scale, which is essentially increasing returns to success.  In other words, the extent to which eBay is the largest auction site makes it more likely that someone listing or someone looking to buy via an auction will go there first, which puts them even further ahead of their next largest competitor.  As this process continues eBay becomes even larger.

eBay recognized the opportunity with merchant stores—The result of the four factors above is that you’ve got to search eBay separately. EBay recognized the opportunity that this created. Specifically, that enabling merchants to build out their own “stores” within eBay created an opportunity for eBay to make even more money because stores would be exposed to traffic that might not find them through searches on the general Web or shopping searches.

In the US, the game is over and one doesn’t even remember that there once were other auction sites of any size. This isn’t the case in many other countries, and eBay has had to acquire the dominant players in those countries for this very reason that it’s extremely difficult to catch up if you’re small and your competitor is big. In other markets where the two (typically) competitors are close to being the same size, they’re locked in intense competition to emerge as the dominant marketplace in that country, and once one pulls ahead by any significant degree, the dynamics noted above will really kick in. In the case of other merchants, while there may be increasing returns to scale, there is not this powerful effect which drives a huge wedge between the dominant player and the next largest.

Collectibles and things not found in stores—If you’re trolling for one of the early GI Joes, a particular tea cup from 100 years ago, or will settle for a used monitor, where else would you go other than to a place where you can buy it directly (and presumably most cheaply) from the person selling it. Who needs a “dealer” when you can buy direct?

eBay results often don’t show up—I’ve found that eBay listings don’t show up in Google search results (other than the paid ads along the right side, which are humorously off-target sometimes. Here’s one example:

Arc De Triumph
Aff. Cheap deals on
everything Arc De Triumph.
eBay.com

Those that do are sometimes out-of-date—Sometimes the results that do show up are found on pages that are created through the use of eBay’s APIs, which enable others to build applications that pull information from eBay. By formatting this information on a page that has a high rank in search engine results, the entrepreneur is hoping that at a least a few people click through, bid, and eventually buy something on eBay, which generates a commission for him. The developer programs from eBay and from Amazon have resulted in a lot of these, and since in the Google search results they don’t reveal that these pages are simply a repackaging of sometimes expired our or out of date products, it frustrates users who are using something like Google to look broadly for product and price information. Both Amazon and eBay claim that their developer programs have been very successful, but it’s clear that one of the unintended results is negative for buyers who use a search engine as a shopping interface.